NJ Police and Fire Pension Bill: From the Fire to the…

Chuck Reed, former Mayor of San Jose, and a board member of the Retirement Security Initiative, a national, bipartisan advocacy organization focused on protecting and ensuring the fairness and solvency of public-sector retirement plans had an op-ed on njspotlight arguing against just approved Senate-Bill 3040 to turn over the police and fire pension system to the police and fire unions.

It is true that the New Jersey retirement system has been a disaster, with systematic overpromising and underfunding running up billions of dollars of pension debt. You might think it could not get any worse. You might think letting the public-employee unions take it over might not be disastrous. You would be wrong.

If you think legislators and governors have been irresponsible, too willing to give out sweet benefits and too unwilling to pay for them, you are right. But legislators and governors at least have to face the voters from time to time. Instead, this bill would put people in charge of making decisions who never have to face the voters. People who have no interest in controlling the spiraling costs of existing or future benefits would get unlimited credit cards. New Jersey is set to jump from the frying pan into the fire.

Three points:

1) Politicians Facing the Voters

Perhaps it is different in California but from what I have witnessed most voters here are spoon-fed candidates hand-picked by political bosses looking for a combination of naiveté  and ready acquiescence to the wishes of their masters (law firms and other vendors making their living off government contracts). These people are uninterested in fiscal restraint beyond providing it lip service and voters are either unfazed or unaware of the cancers in their midst, despite the obvious symptoms.

2) Unions Managing Their Own Plans

We have them. They are called multemployer plans and many are going bankrupt but for demographic reasons abetted by weak funding rules. Unions have every incentive to keep these plans going and none I am aware of are raising benefits. On the contrary, many are lobbying government regulators to allow massive benefit cuts to keep their zombie plans alive and paying their fees and salaries.

3) Ignoring the Bill

New Jersey Police & Fire unions may be able to elect to bring back cost-of-living-adjustments for retirees or even raise the base benefit and they could get an actuary to put an honest cost on benefits but, after decades of orchestrated underfunding, any requests for the real cost of benefits are more than likely to play out like this:
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18 responses to this post.

  1. Posted by Anonymous on March 29, 2017 at 9:16 am

    Put their P&B under the 2% property tax cap and then this bill is meaningless!

    Reply

  2. Posted by Anonymous on March 29, 2017 at 10:37 am

    IF this bill is so potentially bad why have you stated it does nothing and why do you think both parties voted in favor overwhelmingly?

    Reply

    • That’s a good question to ask of Mr. Reed and all those against it. It passed so easily precisely because it does nothing that would require higher taxes and moves nominal responsibility over to the unions.

      The possible good part of the bill is that it may expose what the real numbers are.

      Reply

  3. Posted by Anonymous on March 29, 2017 at 10:47 am

    Once Public Sector Pension BENEFIT-LEVEL decision-making (base benefits, COLAs, etc.) is turned over to the Unions, the spiraling if NJ into the toilet will be unstoppable.

    Hopefully Gov. Christie sees that, will veto this bill, and sufficiently alert the public to it’s DIRE consequences that NJ legislators will be unwilling to overturn his veto.

    Reply

    • Posted by truesally on March 29, 2017 at 11:37 am

      I’m in favor of anything that will speed up it’s demise ….once that occurs it’s a reset and we can move on for better or worst ….

      Reply

      • Posted by Anonymous on March 29, 2017 at 1:59 pm

        “Demise” yes, but ONLY if those calling the pension shots (now our Elected Officials) have fear of losing the singular thing they want most ….to get re-elected…. and those Elected Officials KNOW that if they raise taxes too much, they will indeed lose their Elected Positions. Hence the justifiable Plan “demise” you want will indeed come via the continued refusal of Elected Official to allocate the absurd amount that will be needed to fund these Plans.

        If we turn over decisions to the Unions, NJ and it’s taxpayers are dead-meat because the Unions have no fear of the voters, or anyone else. Sure, oppressive decisions by the Unions might ULTIMATELY backfire, but only after a great deal of Tax-increase pain foisted upon the Taxpayers.

        Reply

  4. Posted by Anonymous on March 30, 2017 at 8:35 am

    The unions should the turn the pensions over to one of the six insurers contracted under NJABP, mission accomplished.

    Reply

    • Posted by Anonymous on March 30, 2017 at 11:25 am

      Given the current funding ratios, If the already accrued pension benefits were to be turned over (meaning that the insurer assumes the financial obligation), one of 2 things would DEFINITELY be part of the agreement:

      (1) to provide unreduced pensions, the required cash to be turned over to the insure would need to be close to 3 times current assets for State Plans and 2 times current Plan assets for the Local Police Plan, or
      (2) if no more than the cash now in the funds are transferred to the insurer, the promised pensions would have to be cut in HALF for Local Police Plans and by 3 for State Plans.

      Insurers can’t be suckered as have been NJ’s Taxpayers.

      Reply

  5. Posted by George on March 30, 2017 at 4:29 pm

    Can a participant or participating union in the pension scheme, police/fire or other, sue to stop the recharacterization of the pension scheme?

    Reply

  6. Posted by Anonymous on April 1, 2017 at 11:27 pm

    What a dumbass bill S3040/A99 truly is.

    Here’ what to expect when you put Police Union in charge of their own pensions…

    http://www.chicagotribune.com/news/local/breaking/ct-countryside-police-pension-ruling-met-20170331-story.html

    Reply

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